May 1, 2017
Personal income & outlays were loaded with important news including snail's pace growth in wages & salaries and a very rare decline in core PCE prices which ticked 0.1 percent lower with the year-on-year rate down 2 tenths to 1.6 percent and further away from the Fed's 2 percent target. Underscoring the weakness of the report, and also of first-quarter GDP in general, was no change for March consumer spending.
Anecdotal reports on the consumer have been extremely strong and are proving themselves unusually poor indicators of actual spending. But hopefully the pattern will be broken in April should consumer spending show the same kind of extremely sharp upturn that Gallup's consumer spending measure posted in the month. Yet Gallup, like consumer confidence reports, has been tracking far higher so far this year than actual consumer spending. Anecdotal data out of the factory sector have also been unusually strong and likewise far above actual data from the government. But today's ISM headline, after beating the Econoday consensus for 7 straight months, did slow significantly.
The day's news won't be raising pressure on the Fed, which meets tomorrow and Wednesday, to continue raising interest rates. Stocks were mixed with the Dow down 0.1 percent to 20,913 but the Nasdaq up 0.7 percent to 2,388.